On April 15, 2019, FERC accepted PJM Interconnection, L.L.C.’s (“PJM”) changes to its Variable Resource Requirement (“VRR”) demand curve as well as key cost inputs to the curve, in connection with PJM’s 2019 Base Residual Auction for the 2022/2023 Delivery Year.  While FERC concluded that PJM’s proposal would produce accurate market signals, encourage appropriate capacity investment, and achieve an adequate level of reliability, the decision sparked a dissent from Commissioner Glick, who argued that PJM failed to show that its proposed VRR curve would produce just and reasonable rates.  Commissioner Glick added that the proposal did not go far enough to correct either oversupply of generation in the capacity market or distorted price signals for Energy and Ancillary (“EAS”) services.
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On April 18, 2019, FERC partially granted a complaint American Wind Energy Association and the Wind Coalition filed against the Southwest Power Pool, Inc. (“SPP”), alleging that the membership exit fee provisions, as applied to entities who are not transmission owners, violated the cost causation principle and resulted in unduly discriminatory rates (the “Complaint”).  FERC found that SPP’s membership exit fee is unjust and unreasonable because it creates a barrier to SPP membership for non-transmission owners and appears to be excessive. Accordingly, FERC directed SPP to eliminate the membership exit fee for non-transmission owners.

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On April 10, 2019, FERC dismissed a complaint (“Complaint”) filed by RTO Insider LLC (“RTO Insider”) concerning the New England Power Pool Participants Committee’s (“NEPOOL”) policies prohibiting press and non-member attendance and reporting on NEPOOL stakeholder meetings.  FERC granted NEPOOL’s Motion to Dismiss, stating that it lacked jurisdiction over the NEPOOL policies because NEPOOL is not a public utility and the policies in question do not directly affect jurisdictional rates.
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On March 29, 2019, FERC issued an order accepting revisions to the Midcontinent Independent System Operator Inc.’s (“MISO”) Open Access Transmission, Energy, and Operating Reserve Markets Tariff (“Tariff”) to enhance the scheduling of Generator Planned Outages—i.e., the scheduled removal of a generator from service for inspection, maintenance, or repair.  While MISO previously managed planned outages through voluntary rescheduling, the Tariff revisions at issue: 1) impose penalties for outages scheduled during low capacity margin, high risk periods, and 2) assist generators in scheduling outages by improving the transparency and quality of generator outage information through MISO’s maintenance margin tool. In accepting MISO’s proposal, FERC concluded that these measures would address recent increases in emergency events by incenting generators to schedule planned outages in advance, and by improving MISO’s ability to coordinate these outages to avoid emergency events.
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On April 1, 2019, FERC issued deficiency letters to the six FERC-jurisdictional ISOs and RTOs, asking for additional information about how they intend to comply with the directives of FERC Order No. 841.  The specific ISOs and RTOs are: ISO New England Inc. (“ISO-NE”); Midcontinent Independent System Operator, Inc. (“MISO”); California Independent System Operator Corporation (“CAISO”); New York Independent System Operator, Inc. (“NYISO”); PJM Interconnection, L.L.C. (“PJM”); and Southwest Power Pool, Inc. (“SPP”).  Each grid operator has thirty days to respond to the deficiency letters.
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On Monday, March 25, 2019, ISO New England, Inc. (“ISO-NE”) filed a proposal with FERC for an interim inventoried energy program that would provide incremental compensation to generation resources that store fuel onsite during winter months. ISO-NE’s filing explains that a key contributor to the region’s winter energy security concerns is its reliance on gas deliveries from the interstate pipeline network, which can become constrained during winter cold spells, and that lack of on-site fuel sources during these cold spells can lead to loss of load events.  ISO-NE seeks to reduce this concern by directly compensating generation resources for maintaining “inventoried energy,” defined as “fuel or potential energy that a resource can convert to electric energy at the ISO’s direction.”  The proposal is intended as an interim measure to complement the ISO’s ongoing efforts to develop a long-term, market-based solution to the region’s fuel security challenges.  The ISO believes that the program will contribute to the region’s winter energy security by providing incremental revenue to generation resources that store fuel on-site, reducing the amount of revenue those resources must recover through the capacity market, and decreasing the likelihood that such resources will seek to retire.  However, ISO-NE also clarified that it cannot guarantee that the program will “incent specific resources to take precise actions that improve winter energy security or deter any particular resource that would otherwise be economic from retiring.”
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On March 21, 2019, FERC issued a Notice of Inquiry (“NOI”) seeking information regarding whether and how to revise its policy for determining the rate of return on equity (“ROE”) used in setting rates charged by jurisdictional public utilities.  The NOI also seeks comment on whether any changes to the Commission’s ROE policies for public utilities should be applied to interstate natural gas and oil pipelines.  Specifically, the NOI requests information in eight areas:  (1) the role of FERC’s base ROE in investment decision-making and what objectives should guide the Commission’s approach; (2) whether uniform application of FERC’s base ROE policy across the electric, interstate natural gas pipeline and oil pipeline industries is appropriate and advisable; (3) performance of the discounted cash flow (“DCF”) model; (4) proxy groups; (5) the choice of financial model(s) used; (6) the mismatch between market-based ROE determinations and book-value rate base; (7) how FERC determines whether an existing ROE is unjust and unreasonable under the first prong of Federal Power Act section 206; and (8) model mechanics and implementation.
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At a time of significant industry transformation driven by technological change and spurred on by environmental policy concerns, the Federal Energy Regulatory Commission (“FERC” or “Commission”) has now added a significant layer to the stack of policy debates – the future of transmission investment.  Many states have seized the initiative in terms of establishing preferable resource mixes for in-state customers, and are spearheading significant pushes for greater renewable and storage resource deployment.  FERC has now joined the fray by opening up the policy debate anew regarding how to spur (or whether to spur) additional transmission sector investment.  The FERC order described below focuses on regulatory and market rules impacting transmission investment (Docket No. PL19-3-000).  The agency also opened a companion docket requesting comments on the details of its policies regarding establishment of a public utility transmission owner’s stated return on equity (“ROE”) (Docket No. PL19-4-000).  The Washington Energy Report will provide detailed summaries of these orders via our blog.  FERC’s mention here of “an increased emphasis on the reliability of transmission infrastructure” (emphasis added) could signal an attempt to re-focus the U.S. Department of Energy’s resiliency concerns to an arena that gives FERC home-field advantage.  Lest the states forget, FERC controls the price of admission for a ticket to the interstate transmission network, and this open-ended fact-finding effort bears a high likelihood of impacting the price of such tickets (for a large portion of the continental United States).
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On March 11, 2019, a U.S. district court judge in California denied FERC’s motion to withdraw the reference of Pacific Gas and Electric’s (“PG&E”) adversary proceeding from the U.S. Bankruptcy Court in the ongoing jurisdictional dispute between FERC and the bankruptcy court.  In his ruling, Judge Haywood Gilliam Jr. of the U.S. District Court for the Northern District of California held that removal of the case from the bankruptcy courts was neither required nor permitted because the plain language of the Bankruptcy Code is sufficient to address the questions raised in the proceeding.
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On March 11, 2019, PJM Interconnection, L.L.C. (“PJM”) made a filing informing FERC that it has begun advising Capacity Market Sellers to use both its existing capacity market rules, as well as its proposed Capacity Reform rules while it awaits a final order from FERC on the proposed reforms.  PJM stated that this approach ensures that all Capacity Market Sellers will have satisfied both the existing and PJM’s proposed pre-auction requirements prior to the conduct of the August 2019 Base Residual Auction (for the 2022/2023 Delivery Year) in anticipation of a Commission order.  The Capacity Reform rules include revised Minimum Offer Price (“MOPR”) rules and the “Resource Carve-Out” alternative.
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